4 years ago when I interviewed Sridhar Vembu, CEO of Zoho for The New Polymath, the prime driver in the marketplace for SaaS adoption was better economics compared to on-premise.

But Sridhar also spoke about agility in SaaS delivery

Feature parity to Microsoft Office (and other software) will come sooner than you may think. We provide new updates every month. Cloud software has an intrinsic advantage in terms of speed of evolution. In fact, the comparison I make is between mobile phones versus wired phones. Mobile phones started out bulky and only had voice capabilities. Today, even cheap mobile phones beat expensive corporate PBX phones in terms of features, with mobility a huge added bonus.

Honestly, back then I thought Sridhar was ahead of his time, and we would not see such agility in much more complex enterprise markets.

Last week at Workday Rising, Sridhar’s words kept coming back. Workday does 3 releases a year, and even more impressive is what Dave Duffield describes as “the force of one” – having all customers on the same release is much more empowering. SaaS/Cloud vendors have dramatically shrunk the announcement/availability/customer acceptance cycle.

It is also an existential threat to on-premise models. In on-premise world, there is often a 3-4 year gap between product announcement and availability, then another 4-5 years till the last customer goes on that release. That is an eternity compared to SaaS world announcement/availability/acceptance cycle.

Around economics, on-premise vendors managed to muddy waters with their FUD filled financial models. They will not be able to do so around agility. Either they dramatically shrink their own announcement/availability/acceptance cycle or keep hoping their financial arguments still continue to confuse a shrinking group of prospects.

CEO of Deal Architect, a top advisory boutique recognized in The Black Book of Outsourcing, author of a widely praised book on technology enabled innovation, The New Polymath, prolific blogger, writing about technology-enabled innovation at New Florence, New Renaissance and about waste in technology at Deal Architect. Previously Analyst at Gartner, Partner with PwC Consulting. Keynoted at many business and technology conferences and has been quoted in the Wall Street Journal, BusinessWeek, The Financial Times, CIO Magazine, and other executive and technology publications.

One response to “The existential threat to on-premise models”

In the space we focus – small business – on-premise products used my many of them are more in the 12 month cycle. Based on about 8 years on this path, I cannot see the software providers realistically shrinking it any farther – they already struggle to some extent with quality control as it is.

Even with the annual update cycle, likely less than 50% of the user base upgrades that often – 3 to 5 years is likely the majority. It’s not that the user base doesn’t want to see new features/improvements, it’s just that in their minds (based upon history) upgrading equates to expense and problems.